Cash Clash

Interstate banking on the move "The view of the U.S. Government expressed by courts and regulators that savings banks don't compete with commercial banks can only be described as bizarre." Thus said Citicorp Chairman Walter Wriston two years ago at a convention of bankers in Boca Raton, Fla., when he lashed out at regulations that for bid a bank from doing commercial busi ness in another state. But despite those rules, New York's Citicorp has forged ahead in its ambitious plans to begin tap ping the $833 billion pool of consumer deposits held by American savings and loan institutions. Citicorp, the second largest U.S. bank holding company (assets:

$120.1 billion), has undertaken a drive for out-of-state dollars by establishing 120 person-to-person financial centers in 28 other states, 853 regional offices and a na tional network of interstate credit card and real estate financing.

Last week Citicorp's pursuit of consumer cash paid its biggest dividend so far. After a four-month campaign that in directly pitted it against the only larger U.S. financial institution, San Francisco's BankAmerica Corp. (assets: $121.5 bil lion), the Federal Home Loan Bank Board approved Citicorp's bid to buy the troubled Fidelity Savings & Loan Association of San Francisco. If upheld by the Federal Reserve Board, as expected, the takeover would mark the first time feder al regulators have allowed a bank holding company to cross both state and industry lines to buy a thrift operation. This would be a major breach in the rapidly falling wall that now blocks interstate banking.

Citicorp's attempt to gain a foothold on Bank America's turf dates back to early 1980, when a tentative deal to buy Fidelity for $200 million fell through because of opposition from federal and state regulators. After the failing thrift was seized last April 13 by the Federal Savings and Loan Insurance Corp., however, it was rechartered as a federal mutual association when the Government had a more favor able attitude toward interstate takeovers.

Two days after the seizure, the FSLIC held a bidding conference that attracted 32 financial institutions, and a month later Citicorp's bid was declared to be the highest.

Under pressure from California S and Ls and California Senator Alan Cranston, the Federal Home Loan Bank Board an nounced a second round of bidding on June 17. Despite BankAmerica's offer to back financially a California-only merg er, the board announced that the highest bid of the three California S and Ls that participated was still $143 million lower than Citicorp's offer.

Reaction in California to the board's decision ranged from disappointment to outrage. Said California Savings and Loan Commissioner Linda Tsao Yang: "The decision is a tragedy. The entire bidding process was little more than a predetermined effort to legitimize the sale of Fidelity to Citicorp."

Despite its bitter opposition to the Fidelity takeover, Bank-America maintained last week that it was "too early to tell" what kind of impact the merger would have on the Califor nia banking market. "We're not trembling with trepidation because Citicorp is coming to California," said Spokesman Ronald Owens. "We're ready to take on all entrants to this market. It just means the competition is going to get a little heavier." Bank-America, which must still receive the approval of the Federal Reserve Board for its own bold move out of traditional banking, the purchase of the Charles Schwab & Co. discount brokerage firm, is not expected to oppose the Federal Reserve's Sept. 4 review of the Citicorp takeover.

Meanwhile, Congress has been moving very slowly in the task of bringing the antiquated American banking laws into line with economic and financial reality. Senator Jake Garn of Utah, in a bill reported out of committee last week, has proposed some first steps to help ailing savings and loans like Fidelity. If Congress ever gets around to passing Garn's bill, it may find that banks and savings and loans have made it out of date. Interstate banking has already got so far in the financial back door that it is setting up housekeeping in the kitchen.

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